Founded in 1973, Belgium-based SWIFT is used by banks globally for cross-border financial transactions. It facilitates trillions of dollars of cross-border payments between 11,000 financial institutions in more than 200 countries making it the backbone of the international financial transfer system.
In 2014, Russia launched the System for Transfer of Financial Messages (SPFS), a Russian alternative to SWIFT. In 2015, China launched the Cross-Border Interbank Payment System (CIPS), a Chinese alternative to SWIFT. CIPS processed around $12.68 trillion in 2021, a 75% increase from 2020. CIPS has about 1,280 financial institutions in 103 countries and regions connected to their system.
Combine the Russian System for Transfer of Financial Messages (SPFS) with the Chinese Cross-Border Interbank Payment System (CIPS) and you see the foundation of a new Russian-Chinese cross-border payment system bypassing SWIFT and speeding up global de-dollarization.
A Bloomberg article sums up the western financial system’s collective fears:
“Booting Russia from the critical global system – which handles 42 million messages a day and serves as a lifeline to some of the world’s biggest financial institutions – could backfire, sending inflation higher, pushing Russia closer to China, and shielding financial transactions from scrutiny by the west. It might also encourage the development of a SWIFT alternative that could eventually damage the supremacy of the US dollar.”